- A practice appraisal is not the same as a real estate appraisal. A practice’s valuation typically uses earnings before interest, taxes, depreciation and amortization and is modified by a multiple that accounts for other factors. Again, this method doesn’t take into account your new reception desk or the tile you put in your lobby, except that those upgrades are expenses on your books.
With that in mind, should you upgrade before you sell? There are a few important factors to consider.
That’s a big motivator. Whether you are selling to a partner or to a corporation, your bottom line and profitability matter because they make the sale more attractive to buyers and allow you to sell to an outside investor at a higher price. However, remember that the outside investor is most interested in their ROI, so it is important to invest in the areas that will increase profits without increasing costs more than is prudent in practice.
Given how expensive a remodel is, get sound financial advice before investing in an upgrade. Here are 3 of the best strategies others have used:
- Add more exam rooms. Many older hospitals have a larger ratio of back-of-house to front-of-house space than newer hospitals. How about converting the owner’s spacious office into 2 new exam rooms? This move will immediately improve profitability for most practices, especially if it allows the practice to hire another vet and/or make better use of vets’ time.
- Add a new service. Can one of your giant dog stations be converted into a dental office? Again, don’t do this unless it’s easy and will immediately free up your practice so you can become more profitable through more efficient use of space and time.
- Reduce the clutter of the past, including huge lobbies, private offices and bathrooms and other spaces that are potentially unprofitable within reason. It is still important to maintain the work quality of the employees and the break rooms.
attract and retain employees
It’s no secret that there are more vacancies than veterinarians are applying. If your strategy is to sell to one of your employees or a group of your employees, you potentially need to attract them or keep them. This is too much of a fight for some practices, and they’d rather sell to investors who could pay more and offer better benefits. But for others, selling to younger employees is still possible. There are entrepreneurial young associates who prefer the autonomy of their own practice.
If you’re potentially selling your practice to employees, follow the steps below.
View your practice as if you were an investor
Keep excellent books, work on profitability and understand the market around you. Is it saturated? Or is there a lot of untapped potential? Even if the architecture office is not the same as a veterinary practice, our architecture office has successfully completed the transfer of ownership to new partners over many years. During this time we focused on improving our business and profitability and encouraging onboarding of new partners. The senior partners have now retired and the transition has been successful.
Regardless of the type of business, without a strategy for better profitability, young owners are not motivated or able to invest their time and money. As you view your practice as an investor and focus on higher returns, the need to remodel, expand or relocate your practice may arise.
Make it look professional
Nothing in construction comes cheaper than a gallon of paint. A fresh coat of paint and some new artwork and signage can make a worn old hospital look better. It is important! As the first owner, you no longer see the old salmon-colored walls, but your employees do. Invest a reasonable amount to make your hospital look less tired and outdated. Also buy some new equipment as equipment can be depreciated. Think of a facelift, not a major remodel. It’s amazing what a small upgrade can do to your hospital’s morale and image. Your customers will love it too.
Focus on lifestyle
Since the dawn of human civilization, older generations have complained about younger generations and their lack of work ethic. The truth is that these complaints are often unfounded. Generation Y and upcoming Generation Z veterinarians are finding it more difficult to support their lifestyle in the way previous generations were able to. The expenses are high, the demands are numerous and life
is very, very complex. As a working parent and second-generation architectural firm owner, I understand some of these needs. So how do you focus on supporting those who will lead your practice in the future?
- Create flexibility with work. This may not be an architectural idea, although it could be. You could invest in better technology
so that some selected work can be done from anywhere. You could design doctor’s workplaces to resemble those of hotel offices
for several part-time doctors instead of designated jobs for full-time doctors.
- Create perks at work. This could mean helping your employees meet childcare or pet sitting needs while they are at work. This doesn’t necessarily mean “bring your dog or child to work” because there are other ways to help, including financially. Other perks might include free snacks for those long days when they miss a lunch break. Consider helping employees transition back to work after having a child. A lactation room is indispensable for many new mothers and does not take up much space.
Let it go
It’s hard to let go of your practice. You spent an enormous part of your life there. You raised your family around your practice. It’s sentimental and painful to move on. But whether you’re handing over the reins internally or externally, letting go is part of a successful transition. Here are things to consider:
- Clear out and dispose of trash, mementos, and old items. You will never need them again, and neither will anyone else. (For more information on decluttering, see this article on the organized hospital.)
- Store non-hospital items elsewhere, e.g. B. in a storage unit. This can include inactive files (before you can legally shred them), older devices, and seasonal decorations.
- Share your space. Start giving your space (physically and operationally) to others to separate from yourself. Start taking on a management consulting role rather than a medical lead role. This will allow customers to connect with new vets and offer new experiences to other vets. This motivates them to keep working in the practice and to get more involved when they are candidates.
After all, no practice sale is like the other. You may not want to take any personal risk and sell your practice as is. Or the real estate investment group may not be involved in hospital upgrades or may not be aligned with the practice’s ownership group.
Regardless of the situation, ask yourself whether an investment in your physical building can make sense for your ownership transition. In some cases, it can help you sell a more profitable practice to an investor or successfully sell shares to partners. Think of this as your final effort toward hospital design, part of your legacy to yourself and to the practice you built and loved.
Heather E Lewis, AIA, NCARB, AAA is a partner at Animal Arts, an architecture firm in Boulder, Colorado, and a frequent speaker at hospital design conferences. She is a dedicated advocate for minimizing pets’ stress and anxiety during vet visits. She has designed practices and residences ranging in size from 1,200 square feet to 110,000 square feet.
Why are so many vet clinics selling to companies? Ackermann Group. April 4, 2022. Accessed September 1, 2022. https://eval.ackerman-group.com/why-are-so-many-veterinary-hospitals-selling-to-corporate/